Author: 71sim12

Sources: freely adapted from Ribbon Finance docs and website.

Ribbon Finance is an innovative protocol with the mission of ‘helping users access crypto structured products for DeFi’. It combines options, futures, and fixed income to improve a portfolio's risk-return profile.

Ribbon’s two core products are: Theta Vault and Theta Vault Yearn.

Theta Vault

Theta Vault is a yield-focused strategy on ETH and WBTC. The vault allows users to deposit their assets into a smart contract and to earn yield on its deposits by running a weekly automated options selling strategy. The vault reinvests the yield earned back into the strategy, effectively compounding the yields for depositors over time.

The Theta Vaults run two options strategies to generate yields:

  1. Covered call - Vault writes out of the money covered call
  2. Put selling - Vault writes out of the money puts.

Vaults permit cost savings on gas aggregating thousands of transactions for each user to 3-4 per week at once, creating an experience that is simple, cheap and seamless.

Theta Vault Yearn

Currently, funds held in Theta Vaults do not generate any yield, aside from writing options. Every Friday, the vault converts 100% of its USDC balance into yvUSDC by depositing USDC into the Yearn USDC yVault. This helps depositors gain exposure to the yield generated from Yearn on top of the options strategy.

Ribbon DAO

Ribbon DAO consists of multiple smart contracts with a system based on governor Bravo's standard voting system. Voting methods include a vote-escrowed weighting system based on locking RBN for veRBN tokens.

Hence, Ribbon DAO has two tokens, RBN for governance voting and veRBN (vote-escrowed RBN, similar to Curve ve-system) for governance and gauge voting, boosting $RBN rewards earned on staked vault tokens, bribing and sharing of protocol revenue.

Ribbonomics

The Ribbon community voted in favour of the implentation of Vetokenomics in late February 2022: this currently impacts Vault Depositors and RBN stakers.

Vault Depositors are able to deposit their vault tokens (ex: rETH-THETA) in a gauge and earn $RBN. RBN stakers are able to vote like RBN and veRBN holders, but also to boost $RBN rewards earned on staked vault tokens (rather than on liquidity pools as in Curve), delegate boosts, voting power on $RBN reward distribution amongst vaults, and higher share of protocol revenue.

RBN stakers will have the choice to stake their RBN anywhere from 1 week to 2 years.

Options Vault Gauges System: how does it work